Which of the following assets do not go through probate?
When it comes to estate planning, understanding which assets do not go through probate is crucial for ensuring a smooth and efficient transfer of property after someone’s death. Probate is the legal process of validating a will, identifying and inventorying the deceased person’s property, paying off debts and taxes, and distributing the remaining property to the beneficiaries. However, not all assets are subject to probate, and this article will explore some of the key assets that bypass this process.
Jointly owned property
One of the most common types of assets that do not go through probate is jointly owned property. When two or more individuals own property together, such as a house or a bank account, they can choose to hold the property as joint tenants with rights of survivorship (JTWROS) or tenants in common (TIC). In the case of JTWROS, when one owner passes away, the surviving owner automatically inherits the deceased owner’s share of the property, without the need for probate.
Retirement accounts
Retirement accounts, such as IRAs, 401(k)s, and pension plans, typically have designated beneficiaries who will inherit the funds upon the account holder’s death. As long as the designated beneficiaries are named on the account, the funds will be distributed directly to them, bypassing probate.
Life insurance policies
Life insurance policies also provide a straightforward way to transfer assets outside of probate. When a policyholder passes away, the death benefit is paid directly to the named beneficiaries, without the need for probate. It is essential to keep the beneficiaries up to date, as changing them can have significant tax implications.
Payable on death (POD) accounts
Bank accounts and other financial accounts can be designated as payable on death (POD), which means that the funds in the account will be transferred directly to the designated beneficiaries upon the account holder’s death. As with joint tenancy, the POD designation ensures that the assets are not subject to probate.
Transfer on death (TOD) securities
Stocks, bonds, and other securities can be held in a transfer on death (TOD) format. This means that when the owner passes away, the securities will automatically transfer to the designated beneficiaries, avoiding probate.
Understanding which assets do not go through probate is essential for estate planning purposes. By taking advantage of these non-probate assets, individuals can simplify the estate administration process and ensure that their loved ones receive their inheritance promptly and efficiently. It is always advisable to consult with an estate planning attorney to ensure that your estate plan aligns with your goals and complies with applicable laws.
